During the current fiscal, two banks from the South celebrated their jubilees. Karur Vysya Bank celebrated its centenary in June and State Bank of Travancore, celebrated its 70th year of service, in October.

WHILE IT WAS A Century of Smart Banking for the Tamil Nadu-based bank, for the bank from Kerala, it was Tradition of Trust. The senior bank is in the private sector, and the young Turk is the public sector.

It may be added here that the growth history of many banks in India unambiguously reveals that the jubilee years have become the milestones of business growth in their journeys.

Growth rates of the two banks were widely varying during their long history. SBT’s growth was faster. Regarding the total business, SBT’s size is double the size of KVB. The size of the entire business of SBT is Rs.168,123 crore in FY 2016, whereas that of KVB is Rs.89,555 crore. Regarding the spread of their branch network, SBT has 1177 branches compared to 667 branches of KVB. When classified in terms of the state-wise spread of the branch network, SBT appears more as a regional bank. It has 72 per cent of its branches located in Kerala. KVB has 52 per cent of its branches operating in the home-state.

Durable, strong banks

Both the banks have emerged as strong, healthy banks, passing through the periods of widespread bank failures. KVB established in 1916 by the leaders of the local trading community in Karur town, took long to spread its branch network into the neighbouring states. SBT, of course, had state patronage as it was originally established as Travancore Bank Ltd. in 1945, sponsored by the princely state of Travancore. In 1959, under an Act of the Indian Parliament, it was made an Associate of the State Bank of India.

Today among the four Tamil Nadu-based banks in the private sector, KVB remains at the top in terms of its total business. In Kerala, among the five local banks, SBT’s rank is second. SBT had the locational advantages of operating from the state capital in Kerala, whereas KVB was working from an obscure small town, which has grown over the years as an important textile centre.

As a private sector bank, the shareholding of the public in KVB is 98 per cent. In the case of SBT, 79 per cent of share capital is held by State Bank of India. This bank, promoted by the princely state initially, now has only 0.89 per cent of its shares owned by the Kerala Governor on behalf of the state government. The shareholders of KVB are richly rewarded by the high dividends and its top executives are also generously paid. In the case of SBT, the primary beneficiary of the great profits is the State Bank of India, being the major shareholder.

Differences in profitability

There is a vast difference in the net profit declared for FY 2016 by the two banks. The private sector bank has earned a net profit of Rs.567 crore, while SBT could make a net profit of Rs.338 crore only. Though the resource composition of SBT- denoted by the share of CASA deposits – is much better in its case (32 per cent) compared to that of KVB (23 per cent), its bottom line is smaller.

About the quality of assets, it may be noted that the net NPA ratio in KVB is comfortably low at 0.55 per cent, while in SBT it is higher at 2.77 per cent. The data relating to the second quarter of FY 2017 of SBT reveals a denigration of the net NPA ratio to 7.20 per cent. In the case of KVB also there is a small increase in the net NPA ratio at 1.44 per cent.

Since the merger mania is spreading among banking regulators, SBT may not be there to celebrate its centenary as it is expected to be merged with SBI. The old private sector bank, having completed its centenary celebrations, should be able to reach a total business of one lakh crore rupees by next year.

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